10 Indicators that a crypto project may be a scam
The crypto and blockchain space are full of innovative communities with up-and-coming projects that have the potential to change the world for the better. On the other hand, there are unfortunately many scams that take advantage of investors and take away from all of the good being done in this space.
Here are 10 indicators that could suggest a crypto project is a scam:
1. The developers are anonymous, go by pseudonyms, or don’t have a large online footprint
One of the first things you should do when evaluating any project is look at the team behind it. A huge red flag is if the team is anonymous or operates behind pseudonyms. After all, it is a lot easier to get away with a scam if nobody knows who is behind it. It is also helpful to search the team members online to learn more about their backgrounds. Another red flag is if the developers have a small or no online footprint. This could indicate that they have little experience or clout in the space, or that the names and profiles they shared are fake or embellished.
2. The white paper is overly simplistic, unprofessional, or nonexistent
A solid whitepaper will highlight the strategic direction of the project, the risks and opportunities associated with it, and the plan for scaling and implementation, at the very least. If the white paper does not include this, is overly simplistic, is riddled with spelling mistakes, or doesn’t exist, it’s best to play it safe and steer clear.
3. The project came out of nowhere
It is common for scam projects to come out of nowhere, usually during the euphoric height of bull markets. Good, legitimate projects will have a trail usually involve research, consultation, and community input, and won’t just pop up out of nowhere one day.
4. The project is piggybacking on recent popular meme projects
This point is aligned closely with point three, in that the projects that come out of nowhere are often piggybacking on other popular meme projects. For example, following the success of Dogecoin, dozens of new projects all based on dogs popped in the crypto world overnight. Many of these were highly suspect, lacked any legitimacy, and are more than likely scams.
5. You are guaranteed outrageous returns
Any project that guarantees you a quick 100x return or promises to go to the moon in no time, is certainly something to be suspicious of. Not all projects that promise good returns are scams, but most scams promise good, if not outrageous returns. Exercise extra caution if you come across a project offering outrageous returns.
6. Liquidity is NOT locked
This is a huge risk when it comes to the possibility of a rug pull. For more information on rug pulls, check out our post Fact or Fiction: Crypto is a scammer’s paradise. When liquidity is not locked on the project you are investing it, it is a lot easier for the developers to quickly drain liquidity and take off with their investor’s money. For that reason, please do not invest in projects where liquidity is not locked.
7. You are asked to send crypto to the developers address, to wire money, etc.
There is really no situation in which you should have to send crypto to a developer, wire them money, send them gift cards, or anything of the sort. Any legitimate project would never ask you to do this, so if they do, please steer clear.
8. There are spam posts and suspicious social media activity galore
If the project has 100 twitter posts all from accounts that have been created in the last couple days, with tons of 🚀’s, it’s probably bots, and it’s probably a scam. It’s important to closely evaluate the social media activity around specific projects, and if you notice a high quantity of posts that are almost all the same across various platforms, it could be an indication of a scam.
9. Weird celebrity endorsements
There have recently been pump and dump or rug pull schemes associated with a celebrity endorsement. Always be cautious of celebrity endorsements involving individuals who have nothing to do with the crypto space. It’s super easy to pay an Instagram influencer to pump up your project, but this in no way lends any legitimacy to it. Legitimate projects don’t need some random influencer to pump it up, and this is a clear red flag of a potential scam.
10. The project has no real value proposition
Finally, when reading the white paper and researching the project, there should be a clear value proposition that differentiates the projects from others. If the value proposition is overly simplistic, unrealistic, or doesn’t offer anything new, it could be an indicator that there hasn’t been a lot of thought put into the project, or that it was hastily thrown together.
Are there any other indicators to look out for in potential scams? Tweet us at @Crypto_Altruism, to help us create a safer crypto community.
